TERMS OF EXCHANGE

TBY talks to İbrahim M. Turhan, Chairman & CEO of Istanbul Borsası (İMKB), on the activity of the country's largest market exchange, strategies for attracting more companies, and key foreign links.

BIOGRAPHY

İbrahim M. Turhan graduated with a Bachelor’s degree from Boğaziçi University, Faculty of Economics and Administrative Sciences, Department of Management. He received his MA in International Banking in 1995 and his PhD from the same university in 2001. In 2004, he was elected as Board Member by the General Assembly of the Central Bank of the Republic of Turkey. He was appointed as Deputy Governor in 2008. He also served as a member of the Advisory Board of the Contemporary Turkish Studies Chair at the London School of Economics (LSE) European Institute until the end of 2011. He was appointed as the Chairman and CEO of the Istanbul Borsası on January 1, 2012.

How would you characterize activity on the Istanbul Borsası (İMKB) over the past year?

After the outperformance of 2010, the İMKB had a challenging year in 2011. Given the problems associated with the eurozone and global liquidity, the value of the İMKB has declined as have those of many emerging market exchanges. However, despite the adverse conditions, the capital markets in Turkey could remain one of the most liquid exchanges in the region. The İMKB, as one of its region's leading exchanges in terms of turnover and market capitalization, has been passing through a revolutionary restructuring process since 2011. The organization has started to change the structure of the Board of Directors and the relative departments so that the management gains more flexibility. For the rest of 2012, what we expect is the legislation of the new Capital Market Law that is currently in the Parliament. After the completion of the legislation, the structuring of the İMKB as a joint-stock company is planned to be complete. In addition, important steps are being taken to accomplish the horizontal and vertical integration of the Turkish capital markets.

The authorities are aiming to trade all financial products including derivatives, commodities, and energy contracts via a single technological platform and a single investor account at the Settlement and Custody Bank (Takasbank). These changes are in compliance with our medium- and long-term goals to increase the number of listed companies, diversify traded products, and define market capitalization relative to GDP. Furthermore, aware of its pivotal role in the Istanbul International Financial Center (IFC) Project, the İMKB has continued cooperating with regional and global stock exchanges to enable cross connectivity.

What steps are being taken to establish strategic links with regional stock exchanges?

The organization is a member of the World Federation of Exchanges (WFE). Additionally, the İMKB is the founder and holds the Presidency of the Federation of Eurasian Stock Exchanges (FEAS). Founded in 1995, FEAS has 32 member stock exchanges from 29 different countries and seven affiliate members. The İMKB is also the coordinator of the OIC Member States' Stock Exchanges Forum, which consists of 57 stock exchanges. Furthermore, the İMKB has equity investments in the Kyrgyz (24.5%), Baku (5.55%), and Sarajevo (5%) stock exchanges. We believe that further strategic partnerships will create meaningful synergies. Our recent focus has been on capital market linkages and order routing mechanisms with regional markets. At the September 2011 Meeting of the OIC Member States' Stock Exchanges Forum, the İMKB, Egyptian Exchange, Dubai Financial Market, Qatar Exchange, Tehran Stock Exchange, and Lahore Stock Exchange decided to set bilateral and multilateral linkages. Following this decision, the potential of the markets has been analyzed and views have been exchanged within the market participants. Alternative linkage models have been studied to a great extent, and the work on the proper model design continues.

How are you looking to attract more local companies and to list on the İMKB?

The İMKB is working to utilize the great potential of the Turkish economy, committed to maintain efforts to increase the number of listed companies. The high growth performance of the economy, sound financial system, and regulations encouraging initial public offerings (IPOs) and corporate governance practices will provide the ground for the success of our vision. The İMKB has established close ties with the Union of Chambers and Commodity Exchanges of Turkey (TOBB) and other local chambers to attract the top 1,000 firms and SMEs in the country. The IPO campaign that began in 2008 also continues, with effects observed in 2010 and 2011. The annual average number of IPOs, which was just six between 2003 and 2009, has reached 25 in the past two years. Moreover, the major target of the İMKB's Emerging Companies Market (ECM) is to enable SMEs to raise funds from the capital markets. Joint-stock companies that do not meet the quantitative listing criteria of the İMKB are traded in the National Markets, but their growth and development potential can be traded on the ECM. The Small and Medium Industry Development Organization (KOSGEB) has also put into force the “Emerging Companies Market SME Support Program," with which the IPO costs are financed through non-repayable funds. As an additional incentive to the public offerings initiative, the İMKB is applying a discount of 25% on initial listing fees, which will be in effect until the end of 2012.